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Maximizing your utility since 2013

Category Archives: Microeconomics

Corporate culture receives a lot of coverage in the media and in business courses. It’s a relatively hard to define concept, so it’s not easy to do research on it in a rigorous way. Many questions could arise about corporate culture, one that comes to my mind is whether it’s all just PR, or it really has some kind of an effect on corporate performance.

Let us define corporate culture as creating common goals/aspirations for all employees, and aligning these goals with those of the firm. If this is the case, then it is not hard to see how corporate culture can be useful. But do investments in culture always pay off? Or does it depend on the nature of the industry a firm is operating in?

Social capital broadly speaking refers to the degree to which people in a community tend to trust and cooperate with each other. It is a concept that is obviously country-specific, and has been shown to affect economic development.

In general, it is thought that social capital is hard to change. It is usually passed down via one’s family. Algan, Cahuc and Shleifer (2013), however, hypothesize that perhaps education, and more specifically not the quantity but the method of education used in schools can help build social capital.

We live in a world with imperfect information, that is in a world where consumers do not know everything about each competing product on the market. This is to the disadvantage of consumers, but nowadays – especially with the spread of the internet – we have a lot of reviews and rankings. Do these really help?

Luca and Smith (2013) investigate whether business schools display rankings on their websites and whether the disclosed rankings are entirely clear or smudged in some way (e.g. saying “top 20 school” when school is ranked #20).

I’ve always been wondering whether different kinds of awards increase the sales of certain goods. Say a literary award for books or an award for a wine. Turns out there is a rather extensive literature on the topic and the answer appears to be yes.

Mostly difference-in-differences models have been used to answer this question, but recently Ponzo and Scoppa (2013) came out with a working paper in which they use a technique called regression discontinuity design (RDD), which I find quite interesting.

In a recent working paper, Carvalho and Koyama explore how cultural identity may influence one’s attitude towards education.

It seems to be a fact that certain groups underinvest in their education relative to others. This phenomenon can be observed in many countries. The hypothesis of the authors is that this is due the fact that education (in a sense) teaches mainstream culture. People belonging to different (sub)cultures thus might resist education for fear of losing their identity.

The notion of positive and negative (semi)definiteness of matrices can be used to help characterize certain naturally occuring matrices in economics. In this post, I will explain when we can say a matrix is positive/negative (semi)definite and more importantly how we can use this fact in economics.

The point of this post is not to present overly formal mathematics, there are plenty of books out there that will do that for you. For this reason I will forgo the proofs and will rather present the intuition behind the notions in question.

In an oligopoly firms produce a homogeneous product so they are directly competing against each other. In perfect competition the same holds with the main difference being that the number of firms is practically infinite. In some sense perfect competition is thus a special case of oligopoly.

Using this reasoning, we can see that as we vary the number of firms in a market of a homogeneous good, we will have a bunch of cases that are in-between an oligopoly with few firms and perfect competition. To determine the benefits of competition, we can ask ourselves how certain variables (such as price or welfare) change as we vary the number of firms.

In addition, in this post we will see why the assumption of perfect competition in many economic models is a reasonable one.